Rand firmer ahead of rate decision

2012-11-22 09:40

Johannesburg - The rand inched firmer against the dollar on Thursday ahead of the South African Reserve Bank's (Sarb's) final rate-setting meeting for the year later in the session.

The rand was at R8.9465 to the greenback at 08:57, slightly firmer from Thursday's close of R8.9550/$.

The currency plunged on Wednesday to its steepest level in three-and-a-half years against the dollar, hitting the 9.0 level as offshore investors dumped South African assets after the failure of international lenders to agree on much-needed aid for Greece knocked broad risk appetite.

A thin market is expected ahead of the Thanksgiving Day holiday in the United States with activity winding down as the Christmas holidays approach.

"Liquidity is starting to dry up for year-end," said Ion de Vleeschauwer, a trader at Bidvest Bank in Johannesburg.

Traders have said the rand could further weaken beyond the 9.0 level, pressured by an unresolved wage strike in the agricultural sector which has followed a crippling wave of violent unrest that swept the country's mining industry.

The Sarb is expected to leave its benchmark rate unchanged at 40-year lows of 5%. The announcement is due after 15:00.

The sharp fall in the rand, coupled with data showing consumer inflation accelerated in October, removed the likelihood that the Reserve Bank will cut interest rates.

Government bonds were mixed, but remained steady with the benchmark note at 5.465%, while the three-year  paper was at 7.600%.